Options Activity Alert: URBN, STT, SNDK

URBN – Urban Outfitters, Inc. – Shares in Urban Outfitters gained the most in the S&P 500 Index on Tuesday morning after the operator of retail brands Free People, Anthropologie and Urban Outfitters, posted better-than-expected second-quarter earnings and sales. The positive earnings surprise and an upgrade to ‘Outperform’ from ‘Market Perform’ at William Blair & Co. sparked a more than 20% rally in the price of the underlying at the open to a new 52-week high of $37.65. Options traders positioning for further upside in the near term picked up out-of-the-money call options in the first hour of the session. The front month options are the most actively traded contracts on Urban at present. Volume is heaviest in the Sep. $37 strike call, where more than 1,700 lots changed hands against open interest of just 72 contracts. Buyers in the early going paid an average premium of $1.15 per contract for nearly 500 hundred of the $37 strike call options, while the bulk of the volume traded to the middle of the market. Several hundred upside call options were also purchased at the Sep. $38, $39 and $40 strikes, indicating some strategists are positioning for shares in the specialty retailer to extend gains during the next four weeks to expiration. Traders paid an average premium of $0.20 per contract for around 400 of the Sep. $40 strike calls. The bullish stance may pay off at expiration in the event URBN shares surge 7% over today’s high of $37.65 to top the average breakeven point at $40.20, the highest level for the stock since April 2010. All told, more than 20,000 options are in play on Urban Outfitters as of 11:45 a.m. New York time, roughly five times the stock’s average daily options volume of 4,060 contracts.

STT – State Street Corp. – The provider of investment management services popped up on our scanners early in the trading session after one or more traders established long positions in front month put options. Shares in State Street Corp. are near their high of the session at present, up $0.90 at $42.29 as of 10:55 a.m. in New York. The stock has gained 9% in the most recent four week period; rebounding off a six-month low of $38.95 reached at the end of July. Perhaps options market participants picking up State Street puts are preparing for shares in the name to reverse recent gains during the next few weeks. STT puts are most active at the Sep. $38 strike where approximately 1,300 contracts changed hands against 69 previously opened positions. The bulk of the put options were purchased for an average premium of $0.16 apiece and may be profitable at expiration next month should State Street shares drop 10.5% to breach the breakeven point on the downside at $37.84. Several minutes after the Sep. $38 strike puts were purchased, some 422 put options were purchased at the higher Sep. $39 strike for an average premium of $0.22 each. These contracts make money at September expiration given an 8% bearish move in the price of the shares to $38.78. State Street Corp.’s chairman, president and CEO, Joseph L. Hooley, and CFO, Edward J. Resch, are scheduled to speak at the Barclays Capital Global Financial Services Conference in New York on September 11th at 8:15 a.m. EDT.

SNDK – SanDisk Corp. – A large bullish position initiated in SanDisk Corp. options in the first 10 minutes of the trading session pushed the provider of data storage products onto our ‘most active by options volume’ market scanner this morning. Shares in the name rose 4% to an intraday and three-month high of $44.00, making SanDisk one of the best performers in the S&P 500 Index today. Options volume is greatest at the Sep. $45 strike where more than 7,100 calls changed hands against previously existing open interest of 2,236 contracts. The single largest-print in SNDK options thus far in the session is a block of 5,415 of the Sep. $45 strike calls that traded for a premium of $0.80 apiece. The options traded to the middle of a $0.76/$0.81 market available at the time of the transaction. Long positions in the Sep. $45 strike call options pays off at expiration should shares in SanDisk rally 4% over today’s high of $44.00 to settle above the effective breakeven price of $45.80. Shares in SanDisk last traded above $45.80 in the first week of April.

About Caitlin Duffy 373 Articles

Affiliation: Interactive Brokers

Caitlin Duffy joined Interactive Brokers in 2009. In her role as Equity Options Analyst, Caitlin provides daily market commentary; highlighting various options trades, trading patterns and strategies of interest. Through Interactive Broker's webinar program, Ms. Duffy presents a number of educational, options-related events describing the theoretical pricing of options, the option Greeks as well as options strategies.

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